Housing as the ultimate marker of poorly functioning (free) markets

Alexis Madrigal considers generational access to housing and the high real estate prices in some markets:

There are obviously many reasons that coastal housing markets have gone so bonkers. But it is an ironic twist that residential property, which once served as the bedrock for American capitalism, has become the most obvious sign for young people that something is deeply wrong with the markets.

What exactly has gone “deeply wrong” with these housing markets? Madrigal lays out a number of factors. But, I wonder if we could extend the analysis a bit further from “housing markets” to “economic markets” more broadly. Here is what two opposing sides might say:

One side: these housing markets with high prices have never truly been free. For decades, federal policy has privileged single-family homes. Local policies have made particular choices, often toward protecting property values and limiting density. Open up these markets to true competition. If affordable housing is needed, limit regulations and let all the money of potential buyers drive new development.

The other side: housing markets have not been regulated enough. The federal and local policies have tended to privilege certain actors – like the white middle-class and connected developers – over the needs of many working-class and poor residents as well as non-white residents. Policies aimed at providing more housing for all need more teeth and the ability to compel protected wealthier residents to accept development near their own homes.

As a sociologist who has studied this for over a decade, I tend to side with the latter argument: (1) markets are rarely ever completely and free and (2) the scales have been tipped toward whiter and wealthier residents for a long time. Perhaps the true lesson of these high-priced housing markets is that calls for regulation and oversight only go so far when property values and who neighbors are is truly at stake.

Downsizing, Marie Kondo, and all the stuff Americans own

Many older Americans want to downsize (and cash out on their homes), Marie Kondo’s approach is popular, but where will all that stuff owned by older homeowners go?

Auctioneers and appraisers, junk haulers and moving companies all seem to be echoing the same thing: The market is flooded with baby boomer rejects. And they cite a number of reasons our kids are turning down the possessions we so generously offer to them. They rent rather than own, live in smaller spaces, collect more digital than physical items and tend to put their money toward experiences rather than things…

Her kids also rejected three sets of formal dinnerware, including Haviland China; vast collections of Lladro figurines and Department 56 Christmas villages; as well as 3,000 Beanie Babies and boxes of soccer awards she and her husband, who both coached for many years, earned with their children.

The only offer she got on any of her treasures? One son wants her Hallmark Frosty Friends ornaments she’s collected over 37 years “because he knows how much they are worth.”

Two scenarios could develop:

1. There will be a growing market in stuff that older Americans no longer want. Perhaps many millennials or Gen Z do not want stuff from their parents but some other American will want it. It does not just have to go to resale shops; enterprising individuals and firms could shop all these items online to find buyers interested in particular niches. Perhaps this could even expand to international markets and be shipped in bulk around the globe.

2. Much of the stuff will simply be thrown away, particularly items that are more sentimental in nature. Some lucky owners will find people to take or buy their unneeded items but much of the rest will simply find its way into landfills. Decades of consumption will end in the garbage can.

I have not seen any estimates either way of how much money all of these goods could generate or how much waste could be involved (or a combination of both).

Also, consider the implications of such a change: younger generations do not take material objects from their parents and grandparents, creating a bit of a gap in a material timeline. Perhaps the shifting of wealth from generation to generation more often takes the form of helping to pay for housing or student loans rather than tangible goods. How does this change memories and collective understandings of the past?

 

Will millennials kill McMansions?

Millennials get blamed for a lot of things and here is another possible area where their choices may have consequences: the selling and buying of McMansions.

The end of so-called “McMansions” has been predicted several times over the years, but those large, mass-produced houses that the baby boomer generation (born 1946-1964) favored as a status symbol kept coming back. Now, baby boomers are entering their 70s and 80s and many are looking to downsize, but they are finding it hard to offload these large homes, facing a paucity of buyers among the millennial generation (born 1982-2000), who are unable to pay the prices they want.

For anxious sellers, however, respite could be around the corner as mortgage interest rates ease, and the millennial generation becomes qualified for more and bigger loans, experts say…

A big problem for the McMansion market is the mismatch between where millennials prefer to live and where those large houses have been built. The younger generation gravitates to cities – where their jobs are — whereas baby boomers have built their homes in suburban locations…

Keys wondered if the housing preferences of the younger generation have truly changed or if there is only a “delay” in the demand for McMansions. Those homes may not be desirable to people in their late 20s but instead to people in their late 30s or 40s, he noted.

This is not the first time I have seen the suggestion that millennials have less interest in McMansions: Builder had a piece on this a few years back. And the baby boomers may have a problem bigger than just McMansions: who will buy all their homes, McMansions and otherwise? When housing becomes a primary investment for so many Americans, not having enough future buyers can become problematic.

More broadly, this discussion follows a typical pattern for stories and studies about millennials: will they act like previous generations (and have not done so thus far for a variety of reasons including an economic crisis and student loan debt) or do they truly have different tastes and want to lead different lives? In the realm of those who care about cities and suburbs, this is an ongoing discussion spanning years: will millennials be suburbanites or city-dwellers? Will they reject lives built around single-family homes and driving and prefer denser, diverse, culturally-rich communities (or a mix of both in “surban” places)?

If I had to guess, this group will exhibit some change from previous groups but probably not drastic change (based on the idea that social change tends to happen more slowly over time). Reversing suburban culture, ingrained among many American institutions and residents, would like take decades and not just one generation. The McMansions of older residents may not all sell at their preferred prices but barring another housing bubble (which could happen), they will be worth some money.

“McMansions are the largest physical boomer legacy soon inherited by their children”

A Connecticut architect considers the McMansion legacy left by a generation of homeowners and builders:

Skyscrapers are the image of New York. The White House is more America than a home. And McMansions have become a punchline. When I sought to find land in 1982, a broker pushed a building lot in a McMansion development, pushing its allure by flatly asserting, “We’re talking about some seriously beautiful homes here.”…

Time has not been kind to we boomers. We basically tanked the entire world’s economy with “irrational exuberance” that found its most publicly grotesque distortion in those McMansions. Make no mistake millions of less-than-McMansions had more distortional impact on the credit markets than the hundreds of thousands of McMansion, let alone the one-off attempts by individuals who try to buy social legitimacy by building large homes — the real mansions…

McMansions are the largest physical boomer legacy soon inherited by their children, the millennials, who have had the worst economic birthing since the Great Depression. Kate Wagner was barely in her 20s when she called out the final fruits of 40 years of serial housing booms that afflicted America. But the impact of in-your-face domestic chest-beating is especially present in Connecticut, which realtor.com trumpeted as having the “metro” with the third most McMansions in the country. And that impact was doubled down by the added insult of unending instant “tear-downs” of those homes built in the previous generation in the tight Northeast.

As an architect I have remade any number of these instantly dated ego vehicles. We have also revived any number of raised ranches, garrison colonials and Capes. Often those homes need strategic expansion. But with McMansions, removal of the offending detail and pretense is often the first remediation.

I like the idea that a social group – here the emphasis is on Baby Boomers – can leave a physical legacy for later members of the same society. People do not just pass down values, norms, and behaviors; they also leave a physical landscape and places that they have made and shaped. Even though we do not focus much on this in the United States, these places shape us and also provide inertia for what future residents will experience. McMansions have the potential to influence millions of lives even as the original designers, builders, and residents may no longer be present.

At the same time, I wonder how obvious the excesses of the McMansion were while they were being constructed in large numbers. It is relatively easy today to look at them with disdain or wonder at what prompted them. A blog like McMansion Hell has the benefits of hindsight as well as new eyes from a younger resident from a different generation. Did this architect call out McMansions back in the 1990s when wealthy Connecticut communities built them in large numbers? My own research suggests the tide starts to turn against McMansions in the early to mid 2000s as consistent critiques of their architecture and consumption arise as well as there are enough of them in communities across the United States to see them as a single phenomenon.

Going forward, I don’t think McMansions will disappear. There is plenty of money to be made in McMansions compared to building smaller housing units. It is not clear that all millennials or future homebuyers will see them as homes to be avoided. And many of the McMansions critics say are poorly built and designed will last for decades.

Census 2020 looking to go online

Reaching younger Americans is part of the reason plans are underway to move parts of the decennial 2020 census online:

Millennials (born from 1981 to 1996) and Generation Z (born after 1996) account for about 35 percent of the approximate 325 million people in the U.S., according to estimates, and census officials say their traditional means of outreach — mail-in questionnaires, landline phone calls and door-to-door surveys — are failing to connect with this significant segment of the population.

The Census Bureau plans to conduct its first-ever online headcount, which it predicts will generate 60 percent of the total responses for 2020…

However, social scientists suggest that millennials and Generation Z could have a hard time appreciating the importance of the census, having grown up amid a distorted media landscape of instant online gratification, “fake news” and a culture of likes on social networks…

Last month, census communications chief Burton Reist was quoted as saying endorsements from celebrities such as LeBron James are being considered. He described a hypothetical situation in which the NBA superstar urges young people during halftime to pull out their cellphones and “answer the census.”

Moving data collection online would seem to offer a lot in terms of lower costs and easier data tabulation. But, as the article suggests, it brings along its own issues such as cutting through the online clutter and working with celebrities to pitch the online data collection.

On one hand, this might lead to the conclusion that it is still difficult to use web surveys to collect information on a broad scale. Unless a research company has a panel of possible participants in a recruited and relatively representative panel, reaching the broader public on a voluntary basis is hard.

On the other hand, perhaps this should be taken as a good sign: the Census Bureau clearly indicates their data collection has to match what people actually use. Going door to door may not be feasible going forward. If people are online or using devices for hours a day, online surveys might be more attractive.

Almost regardless of how this turns out in the 2020 count, it will be an interesting experiment to watch. What will the online response rate be? How will the Census Bureau have to go about advertising online data entry?

“Millennials may (or may not) have killed” starter homes

A list of items millennials may have affected begins with starter homes:

Statistically, the generation that coined the phrase “adulting” has put it off longer than previous generations (see marriage, kids, home ownership). According to Zillow, millennials are currently the largest group of homebuyers, but CEO Spencer Rascoff notes that “starter home” inventory is limited, forcing millennials to rent until they can afford the bigger, more expensive crop of houses. On the bright side, chances are their Pinterest and DIY skills have their rentals looking lovely.

Many of the underlying economic factors limiting the number of and access to starter homes is out of the hands of millennials. Additionally, Americans as a whole are conditioned and pushed purchase and live in larger homes.

Theoretically, millennials could push back more on the delayed adulthood that is now common – but that has its own confluence of factors pushing adults toward achieving adult milestones later.

In the long run, it appears millennials still want to buy homes and are interested in a suburban life. However, this might look different: the process will be pushed back, homeowners may own fewer homes, and the homes themselves could be larger and have specific features. There will still be many smaller homes in the United States but they may require a good amount of renovation, may be fairly pricey to acquire, and Baby Boomers may be in them for a while. The homeownership process does not have to look the same in the future and there might even be some positive twists along the way even as it can be difficult to move away from established patterns.

Chicago neighborhoods lead the way in percentage and absolute numbers of millennials

Chicago continues to be a draw for young adults:

According to U.S. Census population estimates, 73 percent of West Loop residents (6,800 people) are millennials. California-based apartment search website RENTCafe.com analyzed the data, ranking ZIP codes in the country’s 30 largest U.S. cities. And the West Loop — ZIP code 60661 — is home to a higher percentage of people born between 1977 and 1996 than any other in the country, according to their analysis.

But the trendy downtown-adjacent neighborhood doesn’t come close to several other Chicago areas in terms of sheer numbers. Lakeview, Logan Square, Irving Park, Lincoln Park, Chicago Lawn, Pilsen and Lincoln Square — each home to more than 30,000 millennials — all rank among the top 20 ZIP codes in the nation with the largest millennial population, according to RENTCafe.

While the emphasis in the rest of the article is on the excitement in such neighborhoods, I want to hold the data up to two larger trends.

These figures may suggest Chicago continues to draw young adults from throughout the Midwest. From an area roughly from Detroit to Omaha, Minneapolis to St. Louis, Chicago pulls in a lot of residents to the leading city in the middle of the country. This is happening even as the US population continues to shift to the South and West.

Furthermore, these high percentages of millennials may seem out of place considering Chicago’s population loss in recent years. On one hand, the city as a whole is struggling to retain residents. On the other hand, a good number of millennials want to move to and live in Chicago. The long-term trick may be for the city to figure how to keep these millennials in the city even as millennials on the whole might prefer the suburbs later in life.

Even with all of its issues, Chicago is still a desirable place to live, particularly for millennials. These neighborhoods with younger adults could prove very important to helping the city retain its status as a leading global city.